Information Technology and the Structure of Organizations:Formal Theory as a Guide for Empirical Research

University Of California-Berkeley, Berkeley CA

Investigators

Abstract

The research considers the impact of improved Information Technology (IT) on the structure of organizations. Recent empirical work suggests that as IT improves, the organizations using it may find it advantageous to enlarge the scope of individual or departmental decision-making (i.e., to decentralize) and at the same time to make the organization's final actions more sensitive to the information gathered by all departments (i.e., to coordinate). The research will study formal models to determine the assumptions under which these claims indeed hold up. That will require precise specification of the organization's actions, goals, and information-processing activities and precise assumptions about the self-interested behavior of the organization's members when the organization decentralizes. In the main class of models, the relevant IT is the ability to search large databases. To choose appropriate actions, the organization has to track its changing external environment. Each member of the organization specializes in some aspect of the environment, and improved database-search capability allows the member to learn more about that aspect for a given search cost. Search cost will be measured in several alternative ways. The results of the research should be useful in suggesting new hypotheses and methods for future empirical work on the impact of IT at the level of organizations.